It’s Not Really Clear What A House Is Worth In California
The LA Times reports from California. “Few would argue. Southern California home prices have fallen for five straight months, according to data released this month, and are now down 12% from their peak last spring and summer. Jeff Vendley, a Ventura mortgage broker…is trying to sell two Oxnard town houses he bought in 2004 and 2005. Now, he said, people are wondering, ‘How low we can go?’”
“Economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up. For example, a home that sold for $800,000 in 2006 could fall to $600,000 over the next two years.”
“Eric S. Broida has been eyeing a multimillion-dollar house near his Pacific Palisades home and thinks it might be a bargain. Eventually, that is. The 4,600-square-foot house has languished on the market for six months. The sellers have cut the asking price several times, slashing it from $4.6 million to $3.6 million.”
“When the price falls by an additional $400,000 or so, Broida will be ready to pounce. ‘There is nowhere to go but down from here,’ said Broida. ‘I know it in my gut.’”
“Veterans of the last Southland housing slump know that downturns can take years to hit bottom. Between 1991 and 1997, amid a broad economic downturn, median home values in Southern California tumbled 19%, according to DataQuick.”
“As home sales slow, it creates a snowball effect, triggering job losses at escrow companies, construction firms and other sectors and cutting sales at home improvement stores.”
“All that helps make Broida of Pacific Palisades believe that prices will keep falling. ‘People tell me I’m crazy,’ Broida said, ‘but that’s what they told me in 1992.’”
The Daily News. “Foreclosures in the Greater San Fernando Valley area soared nearly fivefold and home sales plunged to their lowest level in almost 20 years in October, a research center said Monday.”
“As the credit crisis increases its choke hold on residential real estate, the Valley’s median house price slipped under its year-ago level for the first time since 1997, said the San Fernando Valley Economic Research Center at California State University, Northridge.”
“Last month lenders foreclosed on 414 properties, up from 84 in October 2006, as owners could not make monthly loan payments.”
“Foreclosures had been increasing an average of 20 a month this year but in October they jumped 112 from September. Daniel Blake, the research center’s director, called the increase startling and said it’s simply a case of more people bailing out of unaffordable loans.”
“Meanwhile, sales in the Greater Valley area last month plunged an annual 55.3 percent to 738 properties. It’s the lowest in the center’s data base which dates back to 1988.”
“The median price slipped an annual 2.6 percent to $589,000. It’s the first year-over-year price dip since March 1997, when the median declined 6.4 percent to $161,000.”
“However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said. ‘But I think that a person with good credit and means to get what they want to buy can get a loan pretty easily.’”
The San Francisco Chronicle. “The subprime mortgage fiasco stands to cost the Bay Area economy more than $5.4 billion next year, according to the latest report intending to put a dollar figure on the rising wave of real estate foreclosures.”
“The study, titled ‘The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas’ examined the gross metropolitan product (GMP) - the market value of all goods and services produced within a region - for 361 areas.”
“Researchers said GMP in San Jose, Sunnyvale and Santa Clara would lose $1.8 billion, and GMP growth would slow to 2 percent, based on lower consumer spending, weak residential investment and falling income in the construction industries.”
“Combined with estimated losses of $3.6 billion in the San Francisco area, the Bay Area stands to lose at least $5.4 billion, not including losses in close-by Northern California counties such as Napa and Solano.”
“Economist Ken Rosen said, the GMP is inherently an imprecise measure that involves cobbling together varying economic indicators on a local level. Rosen said he believes investors in subprime mortgages - who may be far afield - will likely bear the economic brunt of the subprime meltdown, not local economies.”
“‘Most of the loss is not to the homeowner, but to the owner of the mortgage, and they’re not regionally concentrated in the Bay Area,’ Rosen said. ‘We’ve exported maybe a quarter of this loss to the rest of the world.’”
The Union Tribune. “The housing downturn and continued foreclosure crisis could erase $1.5 billion of economic activity in San Diego County next year, according to a report from the U.S. Conference of Mayors.”
“Produced by Global Insight, the study said the foreclosure crisis will have a ‘profound economic effects’ in 2008. It predicted widening foreclosures next year and continued declines in property values nationwide. That wave of foreclosures will further depress home prices. In California, the study predicted declines on average of 16 percent.”
“‘I would say there are much more bearish forecasts,’ said James Diffley, managing director for Global Insight. ‘This forecast is relatively benign in that we don’t think there is going to be a big recession.’”
“Diffley added, however, that the housing downturn has been difficult to predict. ‘We know we’re going down,’ Diffley said. ‘We keep thinking we’re near the bottom, but it keeps receding on us. Right now we’re forecasting the bottom in early 2008, but time will tell.’”
“‘I take the same line,’ said Alan Gin, an economist at the University of San Diego. ‘This crisis is going to hurt, but it will not by itself be enough to derail the economy locally or nationally.’”
“Keitaro Matsuda, an economist with Union Bank of California, noted that consumer spending may not fall as dramatically as the study projects. Over the past five years, home values in many California cities have doubled, he said. So even though prices have fallen recently, consumers may still keep shopping because they feel good about their home equity.”
“‘My feeling is consumers view the current drop in housing as moving gradually,’ he said. ‘Unless they hire an appraiser, it’s not really clear what their home is worth.’”
The Voice of San Diego. “In one of the first local cases in a national crackdown on mortgage and real estate fraud, four people connected with a San Marcos realty office have pleaded guilty to charges that they went to great and illegal lengths to secure mortgages for financially unqualified consumers, thereby pocketing more than $1 million in fraudulent commissions.”
“Alejandro and Emilio Lopez, two owners of Century 21 Eldorado in San Marcos, headed the ‘Lopez Team’ of loan officers, loan processors and real estate agents. Ravinderjit Singh Sekhon was a loan officer there and Linda Velasquez was the office manager, acting as translator for Sekhon with Spanish-speaking clients. All four pleaded guilty earlier this month to charges related to the scheme.”
“Obtaining financing from subprime lenders using so-called stated income or ‘no-doc’ loans, the group fudged employment, rental, bank and even citizenship status information for more than 200 unqualified clients, brokering first and second mortgages for an average of $400,000 each, according to court documents.”
“That federal prosecutors are illuminating the scam marks a public acknowledgement of a significant trend of surreptitious real estate-related fraud schemes that have gone unfettered for years, market watchers say.”
“The Lopezes and Velasquez are each charged with one count of conspiracy to commit wire fraud and face maximum penalties of five years in prison and $250,000 fines. Sekhon is charged with one count of wire fraud and faces a maximum penalty of 20 years in prison and a $250,000 fine.”
“And the defendants have agreed to repay their illegal gains, a total of $1,070,000.”
“The fact that the FBI has found this scam out and has brought charges is heartening for local real estate appraiser and mortgage fraud expert Todd Lackner, whose office is stacked with files he says show schemes countywide.”
“‘I haven’t seen much in San Diego; there’s a huge lag,’ Lackner said. ‘This (scam) has probably been going on for a long time. They’ve probably been investigating this for two or three years. But if they [investigated] this, you would think they were doing other ones.’”
“Obtaining financing from subprime lenders using so-called stated income or ‘no-doc’ loans, the group fudged employment, rental, bank and even citizenship status information for more than 200 unqualified clients, brokering first and second mortgages for an average of $400,000 each, according to court documents.”
San Diego condos for everyone!!!!
And yet the MSM and associated pundits think we’ll have a mild downturn with a slight drop in median prices. Will funny money be back in a couple of years to levitate the markets?
The MSM seems (implicitly, at least) to be counting on a quick return of funny money loans (low doc, no doc, no down, no credit rating, etc) to stem the price decline at only 25 percent down from the bubble peak, which in turn was at least 100 percent over valued from the historical CA price trend. This seems like a pipe dream to me; perhaps I simply have not been around CA long enough to understand the mystery of why real estate always goes up here?
It will take Wall St and other investors a long, long time to again develop an apetite for silly loans. Ever been sick on tequila? If you have, I’ll bet you swoon just at the smell of it.
I dunno ex, seems some are banking on it. Was watching CNBC yesterday and folks seem to be banking on a .50 percent cut from the Fed in the next meeting to get back to the silly loan nonsense. Even folks on the street seem to think the Fed is going to come to the rescue so they can get their value back and refi…it’s a weird environment out there. Delusional doesn’t quite fit what I’m seeing out there now. I’m being pulled back into the game by long-term clients who for lack of a better term have “effed” up severely. I’m seriously considering shutting it down all the way now, it’s getting depressing and I want no parts of it.
No one wants to come to grips with the fact that it is over for a long long time.
Maybe I’ll go away and work on my dismal golf game for a few years.
“I dunno ex, seems some are banking on it.”
I’ll bet some are banking on it. And I’ll also bet that historical evidence would show that either this time is different, or this crowd is in a severe state of denial.
“…or this crowd is in a severe state of denial…”
I would consider this a gratuitous description of what I’m seeing…
Understood, but turning this mess around isn’t so much about low rates as it is insane lending. You can drop the rate all you want, but if you don’t accompany it with maniacal lending it’s a gigantic BFD. Kinda of like having a killer banquet where no one is allowed to eat. So the rate drops to 4%, your still going to need massive downpayments to buy. Your not going to refi unless your LTV is way low in comparison to yesterdays standards. I just got notification today that Wells again tightened the noose on it’s underwriting on a bunch of products. Investors aren’t going to be buying crap for a long time. If you get sodomized in the park down the street, you don’t go to that park anymore (unless that’s your thing).
Gentle friends, this is what separates a housing bubble collapse from a stock market collapse. Time and liquidity. The commodities, equities and currency markets are deep and liquid and in the recent drop in the NASDAQ it took two years 2000 - 2002 before it hit bottom. Housing is illiquid, a liability and twice as large as the entire stock market! Housing is an emotional issue that causes normally sane rational people to behave in irrational manners. And yet, I still read some posts on this blog looking to buy in 6 months. This is still the first inning. There is no panic (as yet), hope is still springing in the minds of interested parties. This is a collapsing bubble.
“Ever been sick on tequila? If you have, I’ll bet you swoon just at the smell of it.”
The Date: April 15, 1986
The Occassion: Celebration of the end of tax season.
The Place: The Oaks Club.
The Music on the Juke Box: Van Halen, Hank Williams, Jr., and Van Halen.
The Drink of Choice: Tequila, straight up.
The Friend: Phil.
The Color of the Puke: A sort of brownish muave.
Nuff said…
And you’re right, I DO swoon at the smell of it.
With me it was Canadian Club - even close to 40 years later it still causes my stomach to churn to smell it.
Dragging it back to the housing/debt mess, I’m glad I only got slightly intoxicated on home equity loans back a few years ago …
Judging from all the red ink i’ve been seeing, all over the world…
We’ve gone from the housing bubble to global financial chaos, in one fell swoop.
My last Tequila hangover was New Years Day 2000…
I could have sworn there was a lil’ Meskin’ with a ball peen hammer, banging away on the inside of my forehead for a few days~
I can’t stomach the smell of Tequila, anymore.
“There is no panic (as yet), hope is still springing in the minds of interested parties. This is a collapsing bubble.”
I concur. First posters here will unanimously agree that ‘real estate is the worst investment’ (and stop talking about when they are going to jump into the market). Next (at least six months later down the road), the same consensus will take hold in the MSM. At this point, nobody will talk about real estate investing plans, for fear of ridicule or worse.
We are nowhere near that place yet (though those LA Times charts lead me to think the avalanche has begun to roll downhill).
The fastest way to get fired as an advisor to an investor is to recommend, or to buy RMBS that is anything but the safe tranche at low leverage (80% or less) to a prime borrower.
This will not change for a long time. I’m with you ex-nvmb. As long as this doesn’t change, prices will HAVE to come down. I think this slide will be at least 5 years, coinciding with the ARM adjustment schedule.
In the meantime, my eye is on inflation. Food costs are increasing out of control. I spoke with a guy who owns a restaurant today–he raised his prices 6 months ago, and he’s going to need to raise them again. A crate of tomatoes was $18, now he expects them to go to $32. Chicken also is increasing significantly…
Fuel for our bodies is more important than fuel for our cars. Stagflation, here we come…we’ll be looking back longingly at 5% 10-year rates 3 years from now…
‘Food costs are increasing out of control. ‘
- Sorry, but Kudlow said that inflation is under control and HE WOULD TELL US WHEN THERE IS A RECESSION!
Food is hedonic inflation. You can always substitute hunger for food.
Fuel is also hedonic inflation, walk.
That is why they are not used in CPI calculations.
“Housing is illiquid, a liability and twice as large as the entire stock market! Housing is an emotional issue that causes normally sane rational people to behave in irrational manners. And yet, I still read some posts on this blog looking to buy in 6 months. This is still the first inning. There is no panic (as yet), hope is still springing in the minds of interested parties. This is a collapsing bubble.”
Indeed, a collapsing bubble is what it is, much as I’d like to see a sharp, fast plunge. I know it is going to take a while when I see wishing prices on the Tampa Bay area of Florida as high in some cases as Cali. A million or more for a house in St. Pete? Complete delusion! In my immediate area, prices of $250,000 to $350,000 for brand new crap, when the area really only supports up to $150,000 on what most of the locals make. And that’s pushing it. When I moved here in 2000, little old concrete block homes could still be had for $50,000 to $80,000. I’ll know we’re at bottom when we’ve reached those prices. Just saw a listing for a little block house at $87,000. Problem is, that’s in gangbanger hood and would have been one of the ones at $50,000 in 2000. So yep, we’ve still got a way to go.
I like your definition better! But so I am not overly confused:
“..For those of you who don’t know, hedonics is the way the government transforms price declines into quality improvements. To wit, you buy a PC with twice as much power, so the government concludes that you really paid only half as much money for it. Hedonics is also the government’s way of taking quality improvements and converting them into price declines when calculating the CPI. Sure, that brand-new Chevy you just bought cost 40% more than it used to, but it’s a 40%-better car for a variety of reasons. So, the government says, the price didn’t really go up. (I have oversimplified these examples, but you get the point.)…” Bill Fleckenstein
First posters here will unanimously agree that ‘real estate is the worst investment’ (and stop talking about when they are going to jump into the market).
I doubt that very much. Most of us seem to have the mindset of contrarian/value investors. Once we see houses selling for cheaper than it would cost to rent them, we will do the right thing. But not before then.
That was the depressing part. Trying to make us believe downturn will be for 2 years & 25 % MAX.
40 - 50 % haircut from peak and bottom will be reached when price has corrected enough.
“The MSM seems (implicitly, at least) to be counting on a quick return of funny money loans (low doc, no doc, no down, no credit rating, etc) to stem the price decline at only 25 percent down from the bubble peak…”
What the MSM refuses to grasp is that without funny money, there is nothing to prop up prices at these levels. And absolutely, it’s going to be a long time before there’s much interest in funding “exotic” mortgages.
Truly news from az_lender: I had announced my loan demand was dead, double dead. Well, not quite. Now that the snowbirds are back in AZ, there is some loan demand there after all. What I am telling people is that the interest rate is about the same as ever (9%-10%) but that the down payment must be really really big no matter what the price of the home or lot. (Normally a mobile home on an RV-park lot w/ condo ownership of pool, ballroom, library, laundro, etc.)
“the interest rate is about the same as ever (9%-10%)…”
Damn, az, we’ve got the Texas Dow Employees Credit Union down here kickin’ our ass - 6.5% fixed, 30 years, no closing costs, 110% financing, you have to be breathing to qualify.
How’s a bank supposed to make an honest living?
Just got back from a doctor’s visit, and my ~50-year-old MD was complaining about how difficult it was for him to refinance and pull out equity in Pullman, WA. They actually called his employer, required back tax statements, required two appraisals, 60% LTV required, etc… And he still doesn’t have a loan, though I’m guessing they’ll finally approve. He’s never gone through anything like this in his life.
Pullman, WA is a “non bubble” market, meaning homes are only 20% overvalued. If this tightening is happening here, it must be happening everywhere.
Ain’t they got no credit unions off up in there?
Pullman, Wa should be a prime candidate for a credit union!
WTF!
Bueller?
We have credit unions, but they sell off their loans like everyone else.
“San Diego condos for everyone!!!!”
Just like it’s July 2005 and I’m walking around Petco Park taking in all the projects in progress and forthcoming holes in the ground.
Speaking of San Diego condos, I was jumped by a crackhead about a block from a big condo complex where 1bedroom condos were going for a half mil. This happened Saturday night around 7pm. Luckily I warded him off with a suitcase and he didn’t appear to want money. I got the impression that he just wanted to scare the crap out of me so he could feel empowered.
It boggles the mind that people paid that much for tiny condos in such a horrible neighborhood. It has always been scary parking there at night but it appears to be getting worse.
“Over the past five years, home values in many California cities have doubled, he said. So even though prices have fallen recently, consumers may still keep shopping because they feel good about their home equity.”
This sanguine view ignores the fact that many FBs have relatively little equity due to outsized mortgages, serial MEWs, etc. Hmm, could “Keitaro Matsuda” be a pseudonym for “Lawrence Yun,” or is the explanation simply that they’re both equally clueless individuals?
His, as well as Ken Rosen’s, extreme narrow-mindedness has just landed them a prime spot on the JT “to do” list.
Shopping propensity is all about “feeling good” — never mind whether or not your bank account is empty and you have no access to credit.
OT, but speaking of credit…
“POSTED: 5:02 pm CST November 26, 2007
WAUWATOSA, Wis. — A melee at a Kmart store in Wauwatosa Saturday morning was started by a computer glitch.
The store was running a promotion in which it would give away $10 to anyone applying for its credit card, but the computer glitch led to everyone’s application being granted — bestowing up to $4,000 in instant credit to anyone who applied even if they shouldn’t have qualified.
Once word started to spread about the so-called “free money” Saturday, witnesses said things got pretty nuts inside the Wauwatosa store.
“They were having a big fight. Two ladies was jumping a lady over credit cards,” witness Sylvester Wilson said.
Nearly a dozen Wauwatosa squad cars responded to the call just before 11 a.m. Saturday for what was called a large fight in progress.
“It was a nice brawl. It came from inside to outside. If you go up there, you’ll see hair, earrings, all pulled out on the ground,” Wilson said.
What started as a fight between two women in the crowded store evolved when several men intervened.
A store employee got punched in the nose and crashed through a glass display case. He was treated for a broken nose and various cuts.
Two suspects, a 22-year-old man and a 16-year-old boy, were arrested, accused of battery.
Meantime, Kmart is still trying to clear up the credit card mess.
Two employees confirmed for police that anyone who applied was being given instant credit — from $850 up to $4,000. They also told police that people started calling other people to the store for so-called free money. The store ran out of credit applications.
One witness told police someone went to another Kmart, got some applications there and was selling them in the Wauwatosa Kmart parking lot for $20 apiece.
Kmart would not comment on how many people got the credit cards who shouldn’t have or how much merchandise they were able to buy with them.
The store did put a stop to it, though. There are signs on the door saying it is not processing credit card applications at this time.
Citibank, which issues the Kmart cards, did not return WISN 12 News’ calls asking if this happened nationwide. WISN 12 News reporter Nick Bohr spoke with a Sears corporate relations person Monday who told Bohr he could not really talk about the specific incident but said the credit problem was isolated. It was not a national problem, the spokesman said. Sears owns Kmart.
The suspects remain in custody awaiting charges, which could be issued Tuesday.”
http://www.wisn.com/news/14697601/detail.html
“Two ladies was jumping a lady over credit cards,”
giggity, giggity, giggity….
$4,000 “worth of instant credit” means nothing to most of us, i’d imagine.
But to the tapped out hoi polloi, it’s like a lottery win.
An awful lot of people are perched on the razor’s edge, in this country…
..And the mayor, the Police Dept. and the entire city of Wauwatosa was grateful for the brawl since it was the most live action this city had seen since it’s elderly resident Tomato Plant died this earlier Fall
HelllllllllllllO Wisconsin
whata whuz?..it shudda beena WERE in thar somewhar
“A melee at a Kmart store in Wauwatosa Saturday morning was started by a computer glitch.”
Dr. Bruner: Raymond, wouldn’t you feel more relaxed in your favorite K-Mart clothes?
Charlie: Tell him, Ray.
Raymond: K-Mart sucks.
Iris: So, what are you doing in Las Vegas?
Raymond: We’re counting cards.
Iris: You’re counting cards?
Raymond: We’re counting cards.
Iris: That’s interesting.
Raymond: We’re counting cards.
Iris: I know you’re counting cards, what else are you doing?
Raymond: Are you taking any prescription medication?
“Quagmire, put your pants on!”
“Shut up!”
LOL. In HBB threads past we wondered what the new mania would be. Anyone guess Kmart credit cards? I can’t be sure.
My buddies did not die face down in the mud so that Americans would be denied access to credit.
They can have my credit card when they pry it out of my cold dead hands..
This is what happens when you buy a business (Kmart) that is a recovered bankrupt. Citigroup bidders, beware. They aren’t even bankrupt yet!
Am I missing something, or is the $4,000 of credit still money that you’d be borrowing and would have to pay back?
OT–
As if more than enough bandwidth hasn’t been hogged lately for the purpose of driveling over Schwarzenegger’s response last week to California’s current wave of mortgage delinquencies, that response (and my hallucinogen-induced take on it) is the subject of this week’s post at the Santa Barbara Housing Bubble Blog. Of particular focus therein are the Governor’s recent press releases touting what his office is holding out to his fans as his initiatives to stem the tide of homeowner “pain” (his word) — this from the barbell who ultimately owes every one of his Narcissism-induced careers to his circa-1970 “no pain, no gain” initiative.
Thank you Ben,
Saint Barbara
/pump off
I can only imagine the visuals, as you were scribing away…
Dear Saint Barbara,
Congrats on your website from a fellow Santa Barbarian. It’s always nice to see someone from this neck of the woods telling it like it is.
You should do a peice on the Chapala One condo project. It overlooks my shop and is going very, very sloooooow. I’ve been commenting on that farce of a development on this blogsite for close to a year.
“Economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up. For example, a home that sold for $800,000 in 2006 could fall to $600,000 over the next two years.”
It seems to me this is already the case and they are still not selling. I believe the final resting place for prices can be calculated as follows : 2000 price + 25% - Keep in mind incomes are not up 20% in the past 7 years. Thus a house which sold in 2000 for $300K and again in 2006 for $800K could be expected to settle at $375K when all is said and done. This assumes no overcorrection!
What if you live in an area where income has actually declined? 100% of gains going the other way?
“2000 price + 25%”
I’m guessing that you’re going back to 2000 and adding normal appreciation. Remember though, any reversion to mean is historically accompanied by a plunge below that line, thus bringing the averages back in sync with the historical trend. So I’ll take your 2000 and subtract the 25% to find a bottom, if not more in some areas.
I am also assuming we do not end up with a giant recession or that credit does not completely dry up. From that perspective, the figure I came up with is very conservative.
“Remember though, any reversion to mean is historically accompanied by a plunge below that line, thus bringing the averages back in sync with the historical trend.”
Thanks for clearing that up, ex.
IMHO it all depends on the time frame from when you believe the bubble started.
from 2000:
Some regions of the U.S. housing market show signs of unsustainable price speculation and “froth” from rapid sales, Federal Reserve Chairman Alan Greenspan said. The surge may ease as homes become less affordable, he said.
“It’s pretty clear that it’s an unsustainable underlying pattern,” Greenspan said in response to a question after a speech on energy to the Economic Club of New York. “People are reaching to be able to pay the prices to be able to move into a home.”
Bloomberg Feb 7, 2000
My calculations on the Housing bubble and what I use as the reversion is 1994. The reason is that that was the year the Federal Reserve changed lending policies. In 1995 banks no longer had to maintain reserves for housing loans under 1.4MM.
According to my last mortgage statement, Citibank is pricing my condo at about 1998 prices. So I guess y’all agree
–
“When the price falls by an additional $400,000 or so, Broida will be ready to pounce. ‘There is nowhere to go but down from here,’ said Broida. ‘I know it in my gut.’”
I am sure that 400K is a moving target.
Jas
And that’s the way it works, a continual sliding margin to the downside. Today it’s “I’ll jump” when it drops 400k, or a 100K, or maybe 50K. But as news continues to pour in and confidence continues to weaken, the realized depreciation “pounce-point” will be held off for another 400K, or 100K, or even 50K more to the downside……..and so on, and so on, and so on…..
I’m going to admit I had to break that mindset. Thus, as a well informed individual on the bubble’s status… I expect many sheeple to be fleeced on the way down.
Hence why real estate has long prolonged downturns.
Got popcorn?
Neil
–
“I expect many sheeple to be fleeced on the way down.”
More than on the way up!
Jas
I agree with you, we have to remember Newton’s laws of physics …
Neil,
My manager asked me to buy a condo/townhouse in fall 2008 when prices fall another 10% max. Prices wont fall below that level. His house went from $325K in 2000 to $1.2M now, worst case in 2 yrs it will be $1M.
Should I buy in 2008? he is managing $10M budget..
Tell him to go blow a goat…….and maybe you should get in line. What the heck is anyone but yourself doing managing your budget?
“Tell him to go blow a goat”
I think he already has.
“Tell him to go blow a goat”
ROFLMAO! I think I just blew a funny fuse.
“Prices wont fall below that level. His house went from $325K in 2000 to $1.2M now, worst case in 2 yrs it will be $1M.”
Is that you talking or him talking? It went up 300% in 7 years and it won’t go below $1M??
After seeing that in print on this board, I think I’m changing my name to speechless_near_seattle.
This is the 2nd time today I’ve seen this subject on the threads - WTF - Since when do employers get to tell employees how to spend their money? If it’s casual conversation in a group talking about the housing market, that’s one thing, but if it’s a demand of the job, I’m suspecting it can’t be legal. How about a simple “No thank you,” or if you don’t care about burning bridges, how about “STFU.”
Help!
Ice cream up the nose! The goat bit was too funny.
OCinvestor, your boss just wants to brag about a 7 figure home ($1M). In two years an OC home will probably be down 30% to 50%. Seriously. This is going to get that ugly.
Got popcorn?
Neil
I love HBB Man! I simply luv it! LMAO!!!!
I dotn know how these people become managers…
No he was not pressurising me to buy, I enjoy fingering people (home owners) talking about Real Estate where ever I can, to get an idea of what is going on in real world! Not this HBB silly! We dont know nothing
“…However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply
not the buying power or buyers out there,’
No, not true…there are millions of buyers, but… they’re just afraid!
Adult version:
Go Dog Go!: by P.D. Eastman,
Seller: “Do you like the price of my house?”
Buyer: “No, No, I do not like the price of your house!”
Buyer: “Will you sell it for $200,000 less?”
Seller: “NO, NO… I will not sell it for even $50,000.00 less”
Seller “Goodbye!”
Buyer “Goodbye Again”!
Sweet. I read this book to my 2 year old.
One of my favorites as a child!
“Do you like my hat?”
“No, I do not like your hat?”
If I had only learned that in the real world, people don’t talk like that.
“Was it good for you?”
“No, no! It was not good for me.”
“Do these pants look good on me?”
“No, no. Those pants make you look fat.”
Goodbye!
The correct answer to “Was it good for you?” is yes.
Always remember, and don’t ever forget that.
–
“However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said. ‘But I think that a person with good credit and means to get what they want to buy can get a loan pretty easily.’”
“We” would be lucky if it stops at 165K.
Jas
If the ability to pay (in the form of borrowing standards) goes back to the way it was when the median was $165k, but many thousands more homes have been built, doesn’t that mean that the median would drop below $165k just due to the increased supply of available houses (much less the fear of catching a falling knife)?
Perhaps.
Ostensibly, if borrowing standards return to that level, and if supply is unchanged, then higher incomes since that time could support higher prices.
As we know, the fact is that supply is higher.
And what about incomes?
–
Incomes will fall back to 1996-98 levels, if one takes an optimistic view. People don’t have experience with depressions, but they do happen at least once is a lifetime. And we know their primary cause — Bankers’ Mischief.
Do you agree on the existence of the Bankers’ Mischief worse than at any time?
Jas
What is lost is the fact that $165,000 is still a hell of a lot of money. I think we HBBers understand that but the FBers that have no savings can’t think in dollar terms. When you talk about saving $165,000 you might as well talk about $9 trillion. In their mind it is all incomprehensible. They will be getting a remedial lesson in personal finance and will once again be forced to understand the value of dollars, euros, yen, whatever currency you can think of.
“In California, the study predicted declines on average of 16 percent.” >>>
Keep sliding. I’d like to buy next year roughly, in early 2009. I’ve been eyeing this 10 acre place in Sonoma County. It’s near the coast, very rugged weather, but worth waiting for. Wouldn’t mind retiring and dying there.
There are a lot of areas right now that would give their left nut to get back to being down only 16%. I’m sure many of these places are already located in California.
Not clear what a house is worth? I believe it! a lot of markets have become very illiquid. Today, the Idahostatesman tried to claim that the market in Eagle, Idaho “remained hot” for new homes with the median sales price at 565k. Here is the problem- that is based on the sale of 4 new homes! Total home sales in Eagle numbered 36 in October- as of today there are over 500 properties listed on the MLS for Eagle. That is one hot, though illiquid market!
I’ve seen the same thing in Pullman, WA and Moscow, ID. If only 2% of the inventory sells each month, are those sales really representative? IMHO a few nimwits who didn’t get the memo about the housing crash don’t set the market. If they did, then those dozens of comparables out there for each sale would also sell in a reasonable amount of time–which isn’t happening.
“If only 2% of the inventory sells each month, are those sales really representative?”
“If I fart in an elevator when no one’s around, did it make a sound?”
They have $565k homes in Idaho?
Are they mansions on 100 acres?
There are some incredible houses in Idaho. Look at Ketchum/Sun Valley and the ilk.
THere are some incredible homes in Idaho, but $600k these days gets you a 4000 sq ft, tacky, granite countertop McMansion on a 0.33 acre suburban Boise lot.
“The LA Times reports from California. “Few would argue. Southern California home prices have fallen for five straight months…”
Funny thing is, this story is a front page story in the print edition. Just a year ago, it would have been buried in the “Business” or “California” section.
“Economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up. For example, a home that sold for $800,000 in 2006 could fall to $600,000 over the next two years.”
Sorry, but there are way too many CA homes that would have sold for $800K in 2006 relative to a vanishingly small number of currently qualified buyers, based on traditional underwriting criteria (such as verifiable assets and income). Unless crazy lending comes back soon, I don’t anticipate much price support at the $600K level, especially given falling knife price movement plus the announcement today that GSE conforming loan limits will stay capped at $417K.
yeah, that 417K just drove a stake into the heart of the California market.
and the Dallas McMansion market too (gotta get that dig in!)
see big Dump on the headline of the new Yahoo story on metro foreclosures next year, along with NY and LA. About time this was recognized.
How did that short sale work out?
No answer. I’m assuming I’ve been blown off because the guy is not behind on his payments.
Probably…that’s a hard sale if he’s current, especially if they are being flooded with non-payers.
Time to move on……NEXT!
I just got my offer rejected from Countrywide foreclosure. I offered $375k on a $439k SFR and they didn’t even counter. No wonder that company is going down the tubes. I was serious! I gave them an offer of what I believe that house will be worth next year! Screw them! Idiots! Oh well! NEXT!
It is possible to do a deal with Countrywide, having just completed one in mid-November. It was a short sale instead of a foreclosure and I was on the selling rather than the buying end. The process is not fast, it may take 2-3 months, and it may take more than one attempt. I don’t know how they’re handling foreclosures versus short sales. If you’re not tied to a specific property, you might search for a short sale where Countrywide is the lender.
There are still thousands of homes that are overpriced in cali.I’m up here in roseville, near sacramento, and the minions are still spending.I went to best buy compareing prices on tv’s and the saleslady told me that had 1500 sheeple lined up on black friday.I am renting a small apartment for 1k/ month.Prices are down here but still a lot of people calling a bottom every week.
HP employee?
They’ll write volumes about this generation. Not only is it just fascinating to watch people with no money spend blindly, it’s equally as fascinating to live in a society that makes it possible. It’s f-n surreal to be sure!
“… it’s equally as fascinating to live in a society that makes it possible.”
At this point in the game, it is much akin to watching an old Roadrunner cartoon. We are currently at the point in the action when Wily Coyote has overshot the edge of the cliff, his legs are still pumping, and the Roadrunner is about to hand him an anvil to hasten his fall to the desert floor.
I remember when Rwanda went wrong, thinking to myself what could cause such levels of human depravity?
We’ve set ourselves up for a big fall, and how low we stoop is up to us…
Some of your analogies are plain stupid.
I remember when Rwanda went wrong, thinking to myself what could cause such levels of human depravity?
Never underestimate the power of tribalism. What else could get a Priest to murder a Nun?
What generation are you referring to? Seems to me it is not the young generations that caused this problem. Though it will be my generation that pays for it. I’ve already watched my savings drop by 50% in real terms over the last 4 years, and that was before anybody caught on that anything was wrong.
Where do you get that idea, Matt. Most boomers had long ago bought houses and probably had fat equity - sorry to say it’s mostly the young families with kids that live on the what’s the monthly payment plan with no clue as to real expense. I’m betting that there were idiots spread throughout every generation. Everyone is going to pay - those pensions and 401Ks that are supposed to fund retirements for the boomers will be worth much less and the government spent all the contributions to SS. Post boomer generation has one of the lowest birthrates in history so there will be less people to fund SS. All together now - everybody gets screwed sometimes, there’s no exception to the rules…
A minion, huh. I had to look that one up:
An obsequious follower or dependent; a sycophant.
Rats, now I’ll have to look up those other words….
Prof: Do you notice the predictions of decline keep going up? First they were saying no bubble, then saying it would be just a leveling off, next it was 2-4%, now we’re up in the double digits. I wonder if the knife catchers who have bought in the last couple of months are worried.
announcement today that GSE conforming loan limits will stay capped at $417K. Oh really thats too bad
NO, Mr. Bill!
NO!!!
tee hee…
Boise didn’t deserve that.
Say you’re sorry…
The real question is, why aren’t they LOWERING it? House prices have dropped nationwide! They should drop this limit to 390 to limit risk and strengthen banks.
This cracks me up:
“‘My feeling is consumers view the current drop in housing as moving gradually,’ he said. ‘Unless they hire an appraiser, it’s not really clear what their home is worth.’”
Like some “appraiser” (which means a guy who took an 8 hour course and passed a test) can predict what your house is “worth” any better than you can by taking the last sale on your block and subtracting 10%.
And, of course, only the person who actually buys your house can tell you what it’s worth! That’s the only one who matters.
At this point in time trusting an appraiser to value your home is like trusting Stevie Wonder to pick out a date for you.
Despite a falling dollar, $600,000 is still a *lot* of money…especially with anemic wage increases.
Since the Bay has “exported” it’s loan problems, we can all enjoy the bums at Carlyle taking a hit.
Carlyle’s Blue Wave Hedge Fund Loses 9.3% Since March
Nov. 27 (Bloomberg) — Blue Wave, the hedge fund started by Carlyle Group in March, lost 9.3 percent this year after credit investments backfired.
The fund, overseen by former Deutsche Bank AG executives Rick Goldsmith and Ralph Reynolds, was hurt in October by bets on structured credit, which can include securities backed by repackaged home loans, according to an investor who declined to be named because returns are private. It had $690 million in assets as of Sept. 30, according to a client letter obtained by Bloomberg.
Blue Wave’s decline since March compared with the 10 percent average gain by hedge funds globally and the 6.7 percent return by multistrategy funds that bet on price differences between stocks, bonds and other securities, according to Chicago-based Hedge Fund Research Inc. The losses made Washington-based Carlyle, the world’s second-largest buyout firm, vulnerable to client redemptions.”
The losses made Washington-based Carlyle, the world’s second-largest buyout firm, vulnerable to client redemptions.”
Oh… that could mean so many things. First of which is get your money out!
2nd: What figure did they lose 9.3% total equity or was that the return for clients? Have they fully realized losses or is the fund illiquid hoping for a better day? Do we have another fund about to close all redemptions? That’s going to make it tough to buy Buffy a Gulfstream for Christmas. Perhaps a Hawker would do?
Got popcorn?
Neil
And we still hear the myths about the rich being insulated from this mess. I’m not invested in a hedge fund. Anybody else? It seems the upper crust will get shaken down like the rest of us. It’s a nice thought.
Serf’s up, dude.
Dude — what a wonderful guy word, anyone seen the new Bud Light commercial during the games, all that is said in each little episode ( I’d use vingette, if I thought I could spell it) is “Dude” and I understood each one. “Course, I’m a guy.
Hmmm…the Carlyle Group, of which George Bush Sr. is a major shareholder. In fact, he was even Senior Advisor. Is anyone still wondering why the federal government turned a blind eye to the loose lending? I smell bailouts.
bailouts then causing inflation so we all are on the hook. I hope not.
Major shareholders include the Bush family, the binLaden family and of course, Caspar Weinberger.
“However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said.
QUESTION: When you look at a historical housing price graph, after the huge runs of price increases, historically, don’t the homes for a short period dip under the median high that immediately preceded the run-up?
So when the prices plummet in the next few years, if all goes according the previous bubbles, wouldn’t the median price go lower than the 2000 median?
Make the world a better place,
Punch a realtor in the face!
Wilson
Is there a graph of this information by state and city? If so, I would love to see it. I want to show it to a few used realty salesmen.
I don’t think prices went below the mean in Southern California in the 1990s. I also don’t think the house prices in terms of multiples of rents went below the multiples in the last housing bust in the early 1980s.
“the median high that immediately preceded the run-up”
Wilson, what the heck does this MEAN? How does one define the beginning of the run-up? Prices in 1997 (the very beginning of the run-up) diverged very quickly from historical norms, and of course it did accelerate very much in the final few years. I don’t see any reason why prices now MUST retreat to Y2K levels, but I wouldn’t be surprised if they did.
Hey lender, I agree that prices could easily go back to 2000 levels. The bubble in Minnesota formed in 1997 as well. I wouldn’t be surprised to see prices back to 1998 or 1999 levels. Their incomes have not come close to keeping pace with inflation since 1997. People forget that incomes were falling in 2002 and 2003 while housing prices were shooting up. The divergence of income reality with real estate fantasy is huge.
“However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said. ‘But I think that a person with good credit and means to get what they want to buy can get a loan pretty easily.’”
That person with good credit and means CAN’T possibly get a loan NOW!
He’s too busy ROTF in a pile of Popcorn laughing his ass off at the at the dazes and confused trapped IDIOTS sniffing their EQUITY FUMES
He’s too busy ROTF in a pile of Popcorn laughing his ass off at the at the dazes and confused trapped IDIOTS sniffing their EQUITY FUMES
That’s it, I’m turning off the web cam.
Got popcorn?
Neil
“That’s it, I’m turning off the web cam.”
Thank god. That midget was freaking me out.
OT… Scanning radio channels today I stopped on Rush Limbo talking to a caller from Springfield Mo. The guy was an RE broker complaining about how the Media was damaging their business, and not being honest! Ha. Said RE prices in Springfield were up 4.7% and they were doing great… All RE is local blah,blah,blah. I tried to call in and ask Rush how about asking this dip shit how he felt for the last 5-6 years that the MSM was pumping their happy talk up everyones butt. Could not get through, oh well what should I expect. Just pisses me off to no end that these A-HOLES are not ever called on that point.
Rush Limbaugh? You know better than to listen to that fat wind bag. Shame on you.
AM radio is a such a joke. FM not far behind.
That’s why I spend more time listening to podcasts than anything else. Right now, it’s Global Soul, and I am bopping!
I listen to Savage nation AM 910 in SF Bay Area. He is a nut case but some days it’s entertaining to listen to that self centered A$$ hole.
Don’t even get me started on that fat bastard. When I get a chance at him it’ll be a Joshua tree connected to an airplane prop.
Fat Bastard: [looking at the toilet] What? I didn’t have any corn!
I also heard him today blaming the subprime mess on democrats. It was a bravura performance. Pure propaganda at its finest.
I read today that Rove is blaming the war on the dems - saying they rushed the vote when Bush wanted more time to build coalitions. I want whatever drugs he’s smoking. Over 500 comments on that one with the themes being 1. I thought he wanted to spend time with family - go home; and 2. He’s delusional.
The Bush Administration used Propaganda like there’s no tomorrow! They should be brought to justice for their numerous crimes against American Democracy.
They don’t call old Karl The Architect for nothing…. Hardly a meme passed political muster that wasn’t invented/vetted by him. Machiavelli at least had subtlety.
“OT… Scanning radio channels today I stopped on Rush Limbo talking to a caller from Springfield Mo. The guy was an RE broker complaining about how the Media was damaging their business…”
I used to enjoy listening to this guy(for many years ) until I realsied he was a hypocritcal (felonious) shill. (admitted right winger here). But to have a RE agent on there pumping the product and whining means that the new agenda from the top must be to stop running down the REIC and stop scareing the sheeple. Looks as though there is some serious concern from the government on this as they see the seriousness of the problem. We must understand that no news or information from corporate media is random. It all is disseminated with a purpose and an agenda. Look for more of this denial.
Right this way, keep buying, do it for the good of the country.
‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’
The first question they should ask and disclose in each of these interviews…Do you own a home in California? Question #2 How much equity have you pulled out?
That would tell you a lot about these morons who seem so clueless. From what I can see California would be lucky to not fall well below a 165k median.
“…rices could fall 15% to 25% before turning back up…” HA!!!!
Nice try, wishful thinking. Home prices *WILL* fall by that amount, and much more, through at least the end of 2009. If homeowners are lucky,they’ll escape an overcorrection.
Most experts (whatever that means)ballpark home prices about half of their highs by early 2010. That $2.2M home in Beverly Hills will “only” be $1.1M, still a lot, but closer to a realistic price.
As the saying goes, “It’s gonna get worse before it gets better.” Yeah, a LOT worse.
“‘I take the same line,’ said Alan Gin, an economist at the University of San Diego. ‘This crisis is going to hurt, but it will not by itself be enough to derail the economy locally or nationally.’”
CLICK!
There is no such thing as an economist. It`s like saying you`re an alchemist, or an astrologer. It`s all bogus bullshit. Just some guy who is all mouth, and gets paid for doing nothing.
I could believe CA falling well below a 165K median. That would certainly throw a monkey wrench into the whole state. That’s what scares me the most; my understanding is that the median for CA is around $450 - 500K depending on who you talk to. Even at 450K that kind of a fall is going to get ugly. Assuming that there are 10,400,000 residential units in CA (going by USA average), that’s a $2.9 trillion loss to that state. That’s a loss of 81,000 + per Californian. I fear that this would put the state out of commission, and it’s likely that the surrounding western states, perhaps even the Great Plains states as well, would experience a big fallout from that (we have a huge CA/OR/WA/western state expat population here).
Now do you see why I say to get out of the western USA?
I agree about CA, but I disagree about the western states, many of which are the “Anti-Californias” in terms of policy, economies, etc. Most of the surrounding states have benefitted from CA’s troubles, and will continue to do so as the few remaining profitable businesses and solvent individuals flee the dying Bear.
The fact that 30% of the speculator houses in AZ are owned by CA residents tells me that when they capitulate, it will hurt their economy more than ours as they go bankrupt and we get the properties cheap. Nobody but the Californians themselves ever thought that they were worth the $2.9 trillion you mentioned (that they will lose) - and given the reality of business and politics in that state, they will probably be lucky to settle in at a per capita net worth a little less than the US average. Except for a few areas near the coast, CA is really nothing special, and it will permanently damage the psyche of the masses there to finally realize it.
Assuming that there are 10,400,000 residential units in CA (going by USA average), that’s a $2.9 trillion loss to that state. That’s a loss of 81,000 + per Californian.
Oh, nonsense. For the majority of households that didn’t trade hands during the boom, the “gain” was all on paper, and so will the loss be. Most folks won’t lose any actual money - only the fools who bought at the inflated prices.
jbunniii,
“Oh, nonsense. For the majority of households that didn’t trade hands during the boom, the “gain” was all on paper, and so will the loss be. Most folks won’t lose any actual money - only the fools who bought at the inflated prices.”
I beg to differ; when their money market accounts fail. They may still have a house if they have a job but the potential for their savings to evaporate is almost upon us.
This is an interesting quote…… so should we call them FB’s, or just B’s? FL’s ( L for Lender)?
“‘Most of the loss is not to the homeowner, but to the owner of the mortgage, and they’re not regionally concentrated in the Bay Area,’ Rosen said. ‘We’ve exported maybe a quarter of this loss to the rest of the world.’”
“Some analysts, including UC Berkeley professor Kenneth Rosen, believe the severity of the downturn will vary by region. Areas such as the Central Valley and the Inland Empire will be the hardest hit, he said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15% .”
Price change from peak in the Central Valley’s largest housing market (Sacramento):
DataQuick: -22.6%
CAR: -17.5%
SAR: -22.1%
NAHB: -18.8%
TrendGraphix: -25.2%
RadarLogic: -17.9%
I see hits from UC Berkely Econ department and I wonder if it this clown looking at our blogs. He has to be blind or just lying??
Assuming that he is actually looking at the data, there are some possible explanations:
(1) The -15% is in addition to the declines we’ve already had, rather than a peak to trough prediction.
(2) He is relying on OFHEO’s HPI, which is still under 15% from peak (-7%). HPI tends to lag other price measuresments. Q3 HPI figures should be out this week.
(3) The Central Valley as a whole is doing better than Sacramento (not sure that is true anymore).
Maybe he means #1, then he would be correct…
I think he meant 15% on top of the current decline
Perhaps (to help him out here) by “could fall by 15%”… Ken Rosen means they could fall by “15% more from here”.
In other words, including the 20% or so down you have listed (their approximate average) the total would be 35%.
For Sacramento, in reality, that could be an underestimate.
“He believes values in these communities could fall by 15%”
Maybe Kenneth Rosen has dyslexia and is simply transposing numbers?
“Some analysts, including UC Berkeley professor Kenneth Rosen, believe the severity of the downturn will vary by region. Areas such as the Central Valley and the Inland Empire will be the hardest hit, he said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15% .”
It took a UC berkeley prof to say that? Such incredible insights?
They actually pay these clowns $100,000 a year to conjure up such spicy gems as ‘Areas such as the Central Valley and the Inland Empire will be the hardest hit’!
I was predicting the IE would have a RE meltdown more than two years ago when i first started to go on first the ‘F*cked botrrower ‘Re site , then moved over to Bens Blog. Have been a constant non-stop basher of the IE for over two years running even when such idiots as Husing were touting the IE as the ‘center of the universe’ less than a year ago.
WHOA! Check this out. Why $900 Million in Government help only helped 100 homeowners refinance their mortgage!
Gov Bailouts Don’t Work. It’s wellfare for banks and wallstreet.
http://efinancedirectory.com/articles/Why_%24900_Million_Helped_Less_Than_100_People_Refinance.html
“Keitaro Matsuda, an economist with Union Bank of California, noted that consumer spending may not fall as dramatically as the study projects. Over the past five years, home values in many California cities have doubled, he said. So even though prices have fallen recently, consumers may still keep shopping because they feel good about their home equity.”
And how do lenders (the ones who are still in business, that is) feel about making home equity ATM loans against collateral whose value is falling at a record rate?
“However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said.
Wrong. You should EXPECT prices to fall like a crowbar down a well. You should KNOW that this is not a polite gentle game of Old Maid where everyone is smiling throughout the room. This is a vicious heart-pounding game of SAVE YOUR FINANCIAL LIFE for those who are over extended. Not everyone SURVIVES this game, financially. Some have their financial guts blown out and their financial skulls smashed. There is and will be nothing “gentle” about it.
Don’t sugar coat it MT - what are you really trying to say?
Is Mormon tea caffeinated?
It has ephedra in it.
“…fall like a crowbar down a well.”
Excellent expression. Shall plagiarize it shamelessly.
According to Newton’s Law: a crowbar and a dead cat will fall at the same rate down a well.
However the cat will bounce, and the crowbar will clang which has a nice “ring” to it, so to speak.
“You should EXPECT prices to fall like a crowbar down a well.”
LOL….Yep ,I think I agree with you MT that it’s not going to be “gentle” when the prices correct .
“Not everyone SURVIVES this game, financially. Some have their financial guts blown out and their financial skulls smashed. There is and will be nothing “gentle” about it.”
Is there such a thing as a Shiite Mormon?
http://www.inteldaily.com/?c=139&a=4370
Credit crisis reveals widespread accounting manipulation by top US banks.
The developing credit crisis in the United States, linked to the bursting of the housing market bubble, is beginning to reveal the accounting manipulations employed by major US banks to engage in speculative activities and hide risks. Several major banks have already announced billions of dollars in losses associated with subprime mortgages, and in the next months are expected to announce tens of billions of dollars in further write-downs.
“Credit crisis reveals widespread accounting manipulation by top US banks.”
Enron writ large…
But hey, the executives who were there before got huge bonuses and a nice golden parachute for doing such a crappy job.
This was the subject of a great Paul Krugman editorial a couple days ago. Bank executives are essentially encouraged to lie about profits, because they collect massive bonuses as a result of those profits (even if they’re phony). When the profits are revealed to be phony (benignly dubbed a “write down”) the investors in the bank lose their shirts — but the CEO’s keep the fat bonuses and remain incredibly wealthy. Heads I win. Tails you lose. What a great game!
Seems like cfc has borrowed 50 million or billion from the atlanta fed.They are so in debt it is insane.They are just going to borrow their way out of this and leave the taxpayer holding the bag as usual.
You would think banking regulators would take a keen interest in this issue, given the heightened awareness of the fallout from lax regulatory scrutiny in recent years, wouldn’t you?
Credit crisis reveals widespread accounting manipulation by top US banks
Um, source… World Socialist Website
taken, with a grain of salt
Socialists are always hot on the heels of capitalism, anxious to illustrate and expound upon any evidence of it’s weaknesses. It’s no suprise this blog has it’s share.
USA hasn’t been capitalist since 1906- 1913 or 1933
take your pick
Oh no - the US is capitalist.
Government housing, government backed house loans, small business loans, college loans, government schools, government retirement (social security), government jobs, welfare, food stamps, medicare… that’s capitalism!
We’re a nation of hardworking, fit, intelligent, fiscally prudent, independent individuals.
Spending other peoples money drives poor bargains.
Joey,
have you considered that there are a lot of discouraged capitalists on this blog, who decry the abandonment of market-based capitalism in this country? How many times have you read posters here outraged by the current admin’s willingness to privatize the profits and socialize the costs? How many posted here angry that the Fed’cut rates to protect the ibanks and savage the dollar and thus savers and other prudent folk? How about the government’s willingness to allow such abominations as Level 3 accouting in what is nominally a “transparent” financial system? In fact, where are the banking regulators? Why hasn’t Fannie been delisted, as it should be? Heard a peep from the SEC lately?
It’s watching what is left of captialism morph into corporate cronyism that is driving folks here batshat.
of course I’ve considered all that.. i wade through this blog everyday .. it’s hard to miss.
Who is against privatizing their own profits and then offloading their costs and losses? If the system and law allows it, who wouldn’t do it?
If someone doesn’t like it, then either change the laws or the system.. that’s how it’s supposed to work, and things are working fine.
“Fed cut rates to savage the dollar.. hmm.. Well, when a conclusion is drawn before an argument is made, going further is futile.
Corporate cronyism? Name me an industry, a market or a govt anywhere on earth where cronyism does not exist.
i’ve said it before.. when times get tough people scramble around looking for someone or something to blame.
But when things are running good?? nobody gives a rat’s ass… except socialists, who do not like to see capitalism running good, bad, or otherwise and will use any forum to spout their endless tripe.. including this one.
I suggest that if one’s comment seems like Karl Marx could have voiced it, step back and analyze it before hitting “Add comment”.
who is karl marx?
“who is karl marx?”
Groucho’s brother? (snark)
“Credit crisis reveals widespread accounting manipulation by top US banks.”
Foreign agents practice widespread accounting manipulation. Surprised?
“The median price slipped an annual 2.6 percent to $589,000. It’s the first year-over-year price dip since March 1997, when the median declined 6.4 percent to $161,000.”
$161k to $589k in ten years, and the most pessimistic pundits expect only a 25% drop this time? Dream on, dreamers. 50% is practically in the bag, and it could be worse.
“$161k to $589k in ten years”
Let’s do the math, shall we?!
(589/161)^(1/10)-1 = 13.85% annual gain
14% every year - for 10 years!
Risk took a decade long vacation:
“Many thanks Alan Greenspan and the ‘Do Nothing’ Fed!”
It was a damn nice investment opportunity for those who got in and got out on time. Those who did so owe nothing to Greenspan.
The median price slipped an annual 2.6 percent to $589,000. It’s the first year-over-year price dip since March 1997, when the median declined 6.4 percent to $161,000.”
That is a another feel-good progaganda half-truth and wild desperate distortion of the real facts about the actual Price drops in the valley. They are only stating resale single family homes which are the slowest to fall in price. And the no of Sfunits which did sell was probably miniscule and virtually all of them in the high end. Only 2.6% drop to $589,000? Big fabricated half-truth. The valley housing market is more than 50% Multi-units. Factor these in plus new homes and the real price drops are probably over -10% YOY from last year easily for entire greater SF Valley.
The price drops in the bombed out northeast SFvalley s*itholes (pacoima,panorama city, sun valley, san fernando, sylmar,even slummy parts of north burbank ) have to be -15-20% .
‘We keep thinking we’re near the bottom, but it keeps receding on us. Right now we’re forecasting the bottom in early 2008, but time will tell.’”
Translation:
We keep guessing, but we’re always wrong. Now we’re guessing again, and we just might be right this time.
“When the price falls by an additional $400,000 or so, Broida will be ready to pounce. ‘There is nowhere to go but down from here,’ said Broida. ‘I know it in my gut.’”
Then why think about pouncing? Cougars pounce when they know they have a kill, not when the prey is still a moving target. “There is nowhere to go but down…” If you pounce now, you may very well feel it in your gut as you bend over the porcelain bus 6 months after buying. I love bottom pickers. :>)
It won’t be in their gut where they feel it when they bend over. Think happy thoughts.
“Century 21 Eldorado in San Marcos”
See the chutzpah! Naming a fraud mill as “El Dorado” { City of Gold }
What is city of fake gold in espanol?
According to Newsweek:
“Whenever a borrower has a problem, they should call,” says Chase media relations staffer Tom Kelly. Chase has already modified 17 percent of its subprime ARMs that were due to reset in the next nine months, suggesting some degree of flexibility.”
Anyone actually believe this?
I sure don’t!
Flexibility = ability to bend 90 degrees or more at the midsection.
Reminds me of … :>)
er…the common lily-related flora found in the Mojave above the 2,000 foot level?
“Eric S. Broida has been eyeing a multimillion-dollar house near his Pacific Palisades home and thinks it might be a bargain.”
I am pretty sure he is *not* the Palisades troll who posted here a couple of days ago
What did the “troll” have to say I missed that… Broida will be jumping in a tad too early at only another 400k drop.
Comment by tbgpalisades
2007-11-25 07:30:13
OK, here’s what I don’t get about this blog - the doom & gloom. I can understand having the foresight to know that housing had become unaffordable. But as far as the apparent hoped-for collapse of the general economy - to what end? Personally, my work has never been better, I suspect that holds for many professional and self employed technical workers. Of course, if you think you can make a living by running the local Panda Express you might come up a little short in today’s economy. Point being - stick to housing! This OT stuff is getting to be nonsense drivel.
Professor: he might not be a troll. He might just be delusional. I spent most of my life in the Palisades, and it is a remarkably insulated place, probably like La Jolla in your neck of the woods. Even crappy homes there situated directly on Sunset Blvd. were selling for absurd amounts in the last few years. Thi isolation leads one to believe all the housing hype and then some. I have a good friend who bought a townhouse there a few years back for 800K or so. At a Christmas party last year I was spouting out my beliefs about the coming downfall in housing (not realizing that he had paid that much for a townhouse), and he nearly exploded, he was so angry. Said his neighbor had his place listed for a cool million. I didn’t feel especially gratified by it, as he’s a very sweet soul. It’s my theory that places like the Palisades will get hit especially hard because of this insulation from the real world. I was back over Thanksgiving, and noticed a house on my old street selling for 3.7, having gone down from 4.4 six months earlier. My buddy asked how low it would go. I said 2, maybe 1.5 and he looked stupefied. I smiled, maybe lower.
“…probably like La Jolla in your neck of the woods.”
Good point.
My family took refuge in La Jolla during the recent fires. As we watched houses burning to the ground on a live TV news broadcast to the restaurant where we ate breakfast the first morning, an obviously-wealthy La Jolla resident decried the fact that no firefighters were around to put out the flames. I did my best to explain to her the gargantuan challenges of fighting a Santa Ana driven firestorm bearing down on a major metropolitan area, but I don’t think the message sunk in due to an apparent reality deficiency at the other end of the conversation.
I remember walking into Fred Segal (a high-end clothes store) in Santa Monica a few days after 9/11. Everyone seemed so happy and oblivious, I was wondering if I should tell them about the attacks.
His remarks are perhaps poorly worded, but a valid concern nonetheless. There are many markets besides housing. An outright depression where stored food and buried gold become highly valued is a very extreme thing to picture. A larger version of past corrections seems much more likely. People remember the seventies being an unpleasant squeeze, but just about everyone muddled through and there were only a few riots in relative terms. This time around will involve a lot of squeeze, but people will muddle through and there will probably not be much rioting or other chaos.
The whole lesson of the bubble is that one must seriously look to history for lessons and do the math. Society coming apart at the seams isn’t going to happen as long as technology keeps causing productivity to explode.
I do not know of any place, country or period in history that went into a recession with negative savings. (Plenty of places went negative after the recession was well under way, the US went negative in savings in 1931).
“Professor: he might not be a troll. He might just be delusional. I spent most of my life in the Palisades, and it is a remarkably insulated place, probably like La Jolla in your neck of the woods.”
While in Boot Camp I would often hear, “Where are you from you sorry looking f**k?” I never once heard Malibu, CA for an answer!
You mean we aren’t having another Great Depression with Massive Inflation next year? Americans won’t be moving to Mexico to find work? please say it isn’t so….
“Society coming apart at the seams isn’t going to happen as long as technology keeps causing productivity to explode.”
You mean like Vista?
“Eric S. Broida has been eyeing a multimillion-dollar house near his Pacific Palisades home and thinks it might be a bargain.”
$4.6 mil down to 3.6 mil and E Broida thinks it might be a bargain after another $400,000 drop?
How about another I million $ drop! Down to 2.5 million. I have been around PP and indeed it might be the most desirable community in LA if you just remove the rediculous prices from the equation(Almost half the houses in PP have a splendid view of the pacific from hi atop the hills and Malibu coast just a short hop down the hill). Still, Prices there are astronomical even by West LA hilltop/hollywood hills mega-mansion movie mogul estate standards.
I ‘d say that all the Westside hilltop mega-rich estates are way overpriced and overrated, and hog up all the LA photo ops on LA times, thus leading ignorant fools to conclude that LA is full of rich people. Bunch of hogwash!
“That federal prosecutors are illuminating the scam marks a public acknowledgement of a significant trend of surreptitious real estate-related fraud schemes that have gone unfettered for years, market watchers say.”
The MSM can now add “fraud” to the “subprime problem” that is so often written. Fraud in and of itself will cause at least a 15% correction in prices, borrowing costs rising will be another 25%, and the REOs will tack on that last 10% for good measure. Unemployment will be the big X factor next year that could speed up the process substantially.
Essential HBB viewing: Sidebar link to LA Times story (”Then and Now”) comparing 1990s LA housing bust to current.
Some highlights:
Total drop in 1990s bust = 18.9 percent, spread out over a 53 month period (August 1991 through January 1996)
Total drop in current bust = 12.1 percent thus far (spread out over three months from July 2007 through October 2007)
Annualized rate of decline since July 2007:
[($444,000/$505,000)^12-1] X 100% = 79 percent rate of decline.
Oops! I hit the send button an instant too soon. The picture is not nearly as bleak as I suggested. Trying again:
[($444,000/$505,000)^4-1] X 100% = 40 percent annual rate of decline.
Given that the market is going to bottom out next year, I guess this is nothing to worry about…
If we have a 40% drop in one year, I might consider buying!
Inventory and affordability are the keys…
Got popcorn?
Neil
It doesn’t really matter how much it drops until it gets affordable. Right now as I recall, only 2% of LA population can afford median house. Does anyone know when the highest level of affordabilty was and what it was?
I’m thinking maybe 40 percent or so around 1996 (really just pulling these numbers out of the air, though…)
“The hours of folly are measured by the clock; but of wisdom, no clock can measure.”
William Blake
Oh, I just found something very neat. Please indulge the OT here.
A way to give money away and have it really mean something! I love this!
http://www.modestneeds.org
Thanks Tx,
They have a way to gift a donation for those pesky people on your shopping list!
Smiles,
Leigh
I still like The Human Fund
You know.. Money.. for People.
“‘I take the same line,’ said Alan Gin, an economist at the University of San Diego. ‘This crisis is going to hurt, but it will not by itself be enough to derail the economy locally or nationally.’”
Why does he always have to ruin my G & T hour, this piss-poor excuse for higher learning?
Gin is loathe to give numbers when things are tanking (tonicing?) I didn’t know “derail” was an econometric. No one said the train was going off the damn tracks, only that it may slow down to a stop so that it can dump some of its shipments off to a junkyard for recycling.
“Foreclosures had been increasing an average of 20 a month this year but in October they jumped 112 from September. Daniel Blake, the research center’s director, called the increase startling and said it’s simply a case of more people bailing out of unaffordable loans.”
The road to excess leads to the palace of wisdom… for we never know what is enough until we know what is more than enough. William Blake
OT - So what happens when someone picks up a Citi Bank credit card offer and transfers their current CC debt to it for their zero interest for a year offer (or whatever it is), and Citi bank subsequently goes belly up? Just curious who owes money to whom at that point. I’ve been getting those in the mail every now and then, and that haven’t been able to find the answer to that question.
What is “CC debt”? Bwahahaha.
income streams from uncollectable debts.
booya
Easy answer. Citibank would land in bankruptcy court. The tbankruptcy court would continue to collect money owed by debtors (credit cards, loans etc) in order to maximize the assets in order to pay the creditors of the business.
“OT - So what happens when someone picks up a Citi Bank credit card offer and transfers their current CC debt to it for their zero interest for a year offer (or whatever it is), and Citi bank subsequently goes belly up? Just curious who owes money to whom at that point. I’ve been getting those in the mail every now and then, and that haven’t been able to find the answer to that question”
I have a 10k Citi Card, only borrowed $400 on it so far( They are CC crooks charging 18% interest) so i have been paying it down and tore up card long ago. Maybe i should just borrow the hell out of it since they are going belly up and myself go ‘belly up’ on paying the loan.
On the other hand , can’ t ruin my fico over a POS like Citicard.
“Eric S. Broida has been eyeing a multimillion-dollar house near his Pacific Palisades home and thinks it might be a bargain. Eventually, that is. The 4,600-square-foot house has languished on the market for six months. The sellers have cut the asking price several times, slashing it from $4.6 million to $3.6 million.”
“When the price falls by an additional $400,000 or so, Broida will be ready to pounce. ‘There is nowhere to go but down from here,’ said Broida. ‘I know it in my gut.’”
As prices crumble further into the abyss, those cocksure earlier, will be less sure later.
Perhaps, as with both Ben Bernanke and Dr. Evil, he should have said he’s waiting for a drop in price of “one… million dollars!”
One more discussion with my colleague.
I said I wish I have enough money by the time I hit age 50, to be able to do what I want with steady income from investments.
His response, sure you can become multi millionaire in “2″ years. I am speechless and took the courage to ask “how on a fixed average income”?, and he said you need to stretch a lil bit. I asked how,
and his response, buy the house at the right time, HELOC the max out of it at the peak and invest in more RE.
Speechless again.
Substitute house with POS condo, buy at the right time=2003, HELOC=2006.
The best advice I have ever received on how to become millionaire in 2 years. Priceless.
I feel dumber having read that.
My eyes my eyes! It hurts to even read such stupidity. I can see buying low, and selling high and investing the money BUT NOT IN RE at the high.
“at the high” should read “during the collapse”.
no, this answer was in the form of how to become a 150k’an’aire
that party is over.
I know a 150k an aire, as well as, a HELOC’D 75k’an aire.
you still gotta work.
Bwwwaaahhhhaaa… awww gee wish I had thought of that… and to think I spent all those years toiling over apartment complexes what I dumb ass I am… I should have purchased a couple of condo’s.
We have constructed pyramids in honor of our escaping…
(Pyramid Schemes, that is)
http://www.youtube.com/watch?v=BOqv3zNqsfI
And some say our country doesn’t manufacture anything for export, anymore?
Exhibit A: Packaged Air
“‘Most of the loss is not to the homeowner, but to the owner of the mortgage, and they’re not regionally concentrated in the Bay Area,’ Rosen said. ‘We’ve exported maybe a quarter of this loss to the rest of the world.’”
It’s like saying we only had 75% of a 12 inch spike hammered through our head and someone else might poke their eye out on the remaining 25%. Poor them ?
US and A cannot afford to make fricken socks….we manufacture.
hmmmm? good question.
I can safely say we import inflation.
And we sure have imported some as well. Think only the US has a bubble?
“OT - So what happens when someone picks up a Citi Bank credit card offer and transfers their current CC debt to it for their zero interest for a year offer (or whatever it is), and Citi bank subsequently goes belly up? Just curious who owes money to whom at that point. I’ve been getting those in the mail every now and then, and that haven’t been able to find the answer to that question. ”
To be honest, I don’t think anyone really knows what would happen. If it was a tiny regional or local bank, I’d assume they may call the loan in. Whatever payment they could get, they get. However, I think if Citibank went down the toilet who knows what would happen. It wouldn’t take much to tip Citibank. I worked there a few years ago for a brief time and they are a strong bank, but even they are far from omnipotent (computer system is from the 1970s, I swear. Must be Windows .00311). If any big bank goes down, you could have a run on the banks, uncle Fed may lock down the financial system, who knows. I can’t really tell you what to except that if you feel a bank is going to collapse, don’t go to them. I was at Wells Fargo as an account holder and about a year and a half ago they screwed up on my checking account. They weren’t malevolent but I wasn’t able to get the issue resolved, and at the time they were much more intrusive about verifying who you were and so forth, very bizarre behavior for a bank. I took my accounts to US Bank and I’m glad I did so. Now, I’m finding out that WF may go under with Citi and BOA and the other big banks.
Scary….
If a bank goes under they will sell their loan portfolio to another bank. In the case of your credit cards, a sale is simple and done all of the time, for example MBNA was recently sold. A bank buying the portfolio would likely keep the Citi brand on the cards since it is well known. That would mean that you would see no change to your account — except maybe a different Web site to log into sometime down the road.
Anyway, Citi is not going bankrupt. At the very worst they will merge with another money center bank … and even that is very unlikely.
BofA is not only not going under, they look to be a consolidator in this market. That means that they are looking to buy. If Citi needs a merger partner, BofA would not be a surprise to me.
spinning off the income streams should reward shareholders.
its not “consolidation” rather the notion should come in the form of spin-off.
LOL
Bank of America is a candidate to be acquired not to be the acquirer. Is Berkshire going to step up? I doubt it. China is afraid to touch any companies in America right now, maybe Blackstone. Just not enough information other than BAC is looking at huge write downs for the next year.
The question is at what price is BAC going to be taken under.
rumor has it that Citi might be split up.
That is a problem for the Arabs to worry about. Payback is fun!
However, Blake predicts ‘gently falling prices’ rather than a big plunge. ‘We’re not going back to a $165,000 median but there is simply not the buying power or buyers out there,’ he said. ‘But I think that a person with good credit and means to get what they want to buy can get a loan pretty easily.’”
The RE market is not about location its about money and the ability to provide the market with liquidity. This liquidity contraction is causing a rationing of credit which as the write downs and losses continue to sprirl onward will just get worse and worse. Less liquidity of the RE market means lower prices and lower prices just like Japan.
“That federal prosecutors are illuminating the scam marks a public acknowledgement of a significant trend of surreptitious real estate-related fraud schemes that have gone unfettered for years, market watchers say.”
Small potatoes that. I cannot wait until fraud scheme investigations reach the top of the pyramid.
anyone notice the Chronicle article refferring to “GMP”?!?
Is that the state of financial literacy of journalists. That’s GNP, sh!thead.
I heard today for the first time GMP.
Referring to gross municipal product.
Property and sales tax revenue for a municipality.
Gross Metropolitan Product (GMP) in this case.
I stand corrected…..thanks.
civil unrest coming to the Metro’s
Ive got some live Cracker played the Metro, as well as, Red Eyed and Blue….
On the credit card question: a failing bank would sell its loan portfolio. In the case of Citi the buying bank would likely keep the brand. So on your end, nothing would change. Citi will not go under however, at the very worst they would merge with another money center bank — and that is very unlikely.
BofA is not going under… they are a consolidator (buyer) in this market.
And Citigroup said in its Q2 statement that there were no material effects from its CDOs. (Filed August 3)
And Bank of America said “it would require a restatement of earnings”
And Bank of America is the largest Home Equity player, but it must be different BofA’s customers are paying? Not.
Bank of America may survive, but it will be severely damaged.
Bank of America is consolidating by laying off personnel, cutting all vended lending operations and liquidating stocks and other assets to meet Q4 margins.
In fact BofA is doing so well that they did not really wish to be in the MLEC and they are not worried about the $32 B in liquidity puts on CDOs outstanding. And BofA is doing so well that the stock market really thinks its cheap and the dividend is secure.
If I were long BAC, I would pray to god that MLEC is in place before Jan 1, 2008. They are not in as good a position as HSBC.
Maybe it will survive, maybe not - the dice are not finished rolling.
1500 hours.
24hrs in a day.
37.5 days?
34 days and counting
0.21 0.14 0.20 0.25 640 2,027, (hint bofA 35 strike)
0.28 DOWN from 0.36
0.50 0.40 0.50 0.60 23 540 (hint 40 strike on UBS)
0.50 DOWN from 0.90
recall (this was an 80 cent option when I called it the money)
OK, this is the CA thread so… What are the safest local (L.A.) banks? Any ideas?
the ones offering the highest CD rates.
BTW: Fitch rated a new BofA bond issue just yesterday at AA-. Historically, that rating would imply a less than 1% default (bankruptcy) rate over the next five years. They also gave the new Citi preferreds a AA- rating. These are considered investment grade ratings. Not perfect, but not anywhere near junk either.
“”The AA to BBB [performance] pattern suggests that the fear is a massive liquidation trade that causes spread widening, rather than weak balance sheets that cause default risk,” said Michael Cloherty, strategist at Banc of America Securities. According to Banc of America Securities, the spread, or risk premium, of AA corporate bonds is now at its widest level over US Treasuries since they constituted the index in 2000.”
The risk is not faked, another years income of writedowns and BAC bonds will be trading like CFC bonds. I’ll wait to see BACs balance sheet, but if it is anywhere below 7.5 with more writedowns looming. Sayonarra.
Don’t forget that BofA owns Columbia Management which has $700 billion of AUM and is very profitable. That is a risk diversifier that WaMu and Countrywide do not have. Citi also now lacks an money management arm since it dumped its business to Legg Mason.
In the end, I don’t see a chance of more than one money center disappearing due to this crunch — the Fed will not allow it to happen. of BofA, JPM Chase, Wachovia and Citi — it is Citi that appears closest to the edge, then Wachovia. As banks are consolidated the survivors should be able to add the losers capital to their balance sheets, strengthening their own positions.
Washington Mutual carries an A rating with negative outlook. Countrywide is BBB+ with negative outlook. Both of those ratings are significantly worse than Citi (AA- Negative outlook) and BofA (AA- Stable outlook). A negative outlook means that the rating could be lowered in the future. Ratings below rating is anything above BB (ie AAA, AA, A and BBB).
More losses for Wells, another day, another billion or so. And relying on the rating agencies, Moody, Fitch and Standard & Poor’s to discern investment risk is very sweet, but delusional.
SAN FRANCISCO (MarketWatch) — Wells Fargo & Co., the second-largest U.S. mortgage lender, said late Tuesday that it will set aside $1.4 billion during the fourth quarter to cover higher losses on home-equity loans caused by deterioration in the real-estate market.
Wells Fargo shares fell 4.5% to $28.50 during after-hours trading on Tuesday.
The special reserve covers an $11.9 billion portfolio of loans that the bank originated or acquired through indirect sources such as mortgage brokers, according to the bank. That portfolio will be sold off under the guidance of a dedicated management team, Wells added.
The company, which originated almost $150 billion of mortgages in the first half of 2007, also said that it will tighten lending standards further.
I added a reply above. Wells Fargo does not appear to be in the best of places either. My main point is that not every major bank will go under. The Fed will not allow it. If it gets to the point of widespread insolvency, the weak sisters will be merged into stronger partners. And, I do not see the Fed allowing non-U.S. banks to take over Money Centers. So, the strongest Money Center, which looks like it is BofA, will be in the position of consolidator if worst comes to worst.
The Federal Reserve with all its bluster controls only $50B or so. The US government is broke and cannot bail out this gross corporate irresponsibility. This is not LTCM where a dozen of us were hauled into the NY Fed and told to pony up. The current shortage is $225B due on banks books by Dec 31, 2007. That is real moneys. If Bank of America is the strongest, the entire Treasury department and Federal Reserve Board should be thrown in jail. The Federal Reserve will allow Mr. Omar bin Sulaiman to buy any banks he wishes to purchase. China has just acquired a bank in San Francisco. The banks are targets because of malfeasance. There is no US money center bank that is immune to a takeunder. Citigroup sold out for $25/share. (9.9% of a stock is effective control.)
Well Hoz, I hope that you are wrong. A cheaper house is not worth the world of pain that is coming if you are right.
Hoz, Ironically, the WSJ just reported that BofA approached Citi about a merger and was rebuffed. It is their top story.
http://online.wsj.com/article/SB119621680974306166.html?mod=hps_us_whats_news&apl=y&r=346524
Hoz, Ironically, the WSJ just reported that BofA approached Citi about a merger and was rebuffed. It is their top story now.
“This is not LTCM where a dozen of us were hauled into the NY Fed and told to pony up.”
Hoz —
You speak as though you were right square in the middle of the LTCM debacle. Say it ain’t so!
Draining away: four problems that could beset debt markets for years
By Gillian Tett
Published: November 27 2007 19:06 | Last updated: November 27 2007 19:06
Bill Gross, chief investment officer of Pimco, the world’s largest bond fund, has in recent years become famous for issuing downbeat warnings about the credit world. This month, however, his tone has turned positively apocalyptic.
“We haven’t faced a downturn like this since the Depression,” he observed to reporters when talking about the US housing sector and its impact. The debt market’s “effect on consumption, its effect on future lending attitudes, could bring [America] close to the zero line in terms of economic growth”, he said. “It does keep me up at night.”
http://www.ft.com/cms/s/aeb5d6ae-9d13-11dc-af03-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Faeb5d6ae-9d13-11dc-af03-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
you wanna sell something in the US and A?
go long solid waste.
If you want an opinion on CA banks and their soundness you can check Fitch Ratings. They specialize in banks and are used by Wall Street.
http://tinyurl.com/sfusj
somoebody sell a call on Calloway golf at 11, try June ‘09.
when that happens, the depression is at hand, or a least a serious bear market. When the monied elite think that golf is at risk, the end is nearer.
I’d really like to see someone make a credible case why California home prices won’t revert to $165K (or lower). All the traditional pillars for sustaining housing prices above 3x MHI have been obliterated.
You mean the median household in CA hasn’t gone up to about $200,000 or so in the last few years?
Seriously, I wonder how people that are still buying these mediocre houses for $600,000, as rare as these buyers are nowadays, are affording them.
“The current shortage is $225B due on banks books by Dec 31, 2007. That is real moneys.”
That comment puts into perspective something I found puzzling in a recent financial news story…
CREDIT MARKETS
Fed Acts to Calm Jitters,
Ease Pressure on Banks
As Credit Crisis Deepens
By GREG IP
November 27, 2007; Page C1
The Federal Reserve took steps to stabilize a jittery financial system, though the moves did little to ease the fears of many investors, who flooded into the safety of Treasurys amid mounting economic worries.
The Fed said it would extend loans for longer-than-usual terms to its network of Wall Street bond dealers to ease funding pressure on banks through year end.
http://online.wsj.com/article/SB119608730543403900.html?mod=googlenews_wsj
L.A., O.C. home prices decline sharply
Home prices fall
Local prices of single-family homes fell 7% in September from a year earlier. San Diego had the third-biggest drop, at 9.6%, about double the average in a survey of 20 metro areas.
By Peter Y. Hong, Los Angeles Times Staff Writer
November 28, 2007
U.S. home prices continued to fall at a record pace, and price declines in Los Angeles and Orange counties outpaced other major metropolitan areas in September, according to a national index released Tuesday.
Local prices dropped 7% from a year earlier, according to the Standard & Poor’s/Case-Shiller composite index. The index showed that home prices fell an average of 4.9% in 20 metro areas nationwide.
The index found that median home prices nationwide fell 4.5% in the third quarter compared with a year earlier. That eclipsed the second quarter’s record 3.2% decline, which had been the sharpest drop since the index began in 1987.
San Diego recorded the third-worst decline, with a 9.6% drop from the previous year. The only bigger slumps were in the Florida cities of Tampa (11.1%) and Miami (10%).
Detroit mirrored San Diego, recording a 9.6% drop.
http://www.latimes.com/business/la-fi-homes28nov28,1,589775.story?coll=la-utilities-business
LA Times survey results… (Note that this is the city where in 2003, many believed the average appreciation over the next decade would exceed 20 percent per annum.)
Q. How much will home prices fall before the Southland’s housing market recovers?
10% (8.8% of respondents)
15% (12.6% of respondents)
20% (18.1% of respondents)
25% (15.0% of respondents)
more than 25% (45.4% of respondents)
6018 total responses
http://www.latimes.com/business/la-fi-homes28nov28,1,589775.story?coll=la-utilities-business&vote33965998=1
I dont know if anyone will see this being that I’m posting at 12:55. but this Craigslist add is really funny. http://sacramento.craigslist.org/rfs/491850227.html